The Bank of Spain warns of a deeper recession and already demands a fiscal adjustment plan from the Government




The crisis of the Covid-19 is going to leave a very bulky invoice for the Spanish public coffers. The measures approved by the Government to face the sanitary and economic impact of the coronavirus and the stoppage of the activity derived from the pandemic have shot up public spending and sunk state revenues, which will further increase the current levels of public deficit and debt. . For this reason, the Bank of Spain, which is also now more pessimistic than it was just a month ago and already foresees a further deterioration in the national economy, urges the Executive of Pedro Sánchez and Pablo Iglesias to design and publish the fiscal adjustment plan that, once the current situation is overcome, it will allow the accounts to be cleaned up.

The current estimate of the Government is that the measures adopted have an impact of 138,923 million euros between higher public spending, lower collection and ICO credit guarantees. The Governor of the Bank of Spain, Pablo Hernández de Cos, defended this Monday during his appearance in the Economic Affairs Committee of the Congress of Deputies a forceful and immediate action of fiscal policy to mitigate the loss of income to companies and families during the time required.

However, the supervisor also calls to say how this budgetary effort will be compensated in the future. "We must accept that a greater budgetary impulse nowadays must come hand in hand with a clear strategy of budgetary consolidation," said the governor, who has called for a medium-term budgetary consolidation program that "through the revision of the spending and the tax structure and capacity allow us to clean up our public finances ».

Hernández de Cos admits that the application of this fiscal adjustment should be delayed until the current crisis and its effects are overcome, since the premature withdrawal of these fiscal measures could have more adverse and lasting economic effects. “However, the necessary counterpart must be the early announcement of a strategy to reduce fiscal imbalances for subsequent gradual implementation. In fact, an early definition would have important benefits for the credibility of economic policy and will enhance the expansive effects of the current fiscal measures, "he explained.

It is not the only recommendation of the Bank of Spain, which also calls for an ambitious agenda of structural reforms that allow Spain to improve the growth potential of the economy. "The magnitude of the challenge of fully developing it will require a political agreement that is consistent and that is expected to last for several legislatures," said Hernández de Cos, who recalls that Spain entered the coronavirus crisis "from a starting position of its public finances. vulnerable because of its high levels of structural deficit and debt ”and that those necessary reforms were already before the pandemic.

The Bank of Spain is more pessimistic than a few weeks ago regarding the impact and duration of the economic crisis derived from the health emergency. If a month ago you were forecasting a fall this year of the Gross Domestic Product (GDP) of 6.6% in one of the three scenarios foreseen, of a normalization of the economy after confinement, now you already discard that forecast, it points to a drop in The Spanish economy this year of between 9.5% and 12.4% due to the longer duration of the crisis and does not rule out more unfavorable scenarios. "The statistical evidence accumulated in recent weeks and the difficulties that are beginning to emerge in the face of the eventual recovery make the most benign scenarios, with more moderate falls that were projected only a few months ago, be unrealistic today," he warned, admitting that "the duration of the disturbance is going to be longer than we initially anticipated."


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